Determinants of demand for airline tickets Term Paper

Determinants of demand for airline tickets - Term Paper Example Large carriers in the industry have quite dominated the market, but the tactics of small carriers have been expressed to develop, and be able to penetrate the difficult large carrier zones, by providing frequent services through low cost carrier. It also elaborates the yield management pricing strategy of airline industries to maximize their profits by providing similar services to their customers at different prices. Finally, other concerns that the customers and airlines should consider before respectively buying and selling their tickets, which may affect their satisfaction and benefits are discussed. Keywords: Airline Industry, Customers, Large Carriers, Small Carriers, Low Cost Carriers Pricing Strategy, Demand, Demand Elasticity, Tickets, Profits ,In Flight Amenities Air transportation is one of the fastest modes of travelling in the modern society that has embraced technology and is very concerned with time management. It is very flexible and timely, but not everyone has had t he opportunity to use it. The airfares are quite expensive and some societies may view air travelling as a luxury. However, airline customers are offered a variety of airline tickets to purchase according to their suitability. ... They include income, ticket price, competitor’s ticket price, economy state, customer’s income, availability of substitute mode of transport and substitute price, customer loyalty, fright frequency, and preference among other minor factors (2008). Airline Industry Oligopoly and Ticket Price Taking an example of U.S. market share of the airline industry, in the third quarter of 2009, the four largest carriers, Delta & North, American, United and Continental airlines held 21.8, 15.2, 13.0 and 10.1percents respectively, totaling up to 60.1 % while the others held the 39.9 %, which best refer to an oligopoly situation(â€Å"Airline competition,† 2011). In general Enz states that â€Å"air line in United States, European union and Asia are dominated by a few large carriers† (2010, 65). The Airline industry consists of numerous firms global wise, and at an individual nation level, that merge up at times to create competition in service production. An action by a ny firm carrier in the industry has an impact on the general market since they are interdependent on each other. An entry in the airline industry is often difficult, and the collusion of the few existing companies in the industry gives the merging group superior marketplace control. While providing similar products that at times may be having no variation, it is often associated with insignificant competition if not none preferring product differentiation for a firm uniqueness. If one firm decides to change the ticket price for its customers, then this action would adversely affect the demand of tickets and flow of customers in other firms. Stability of an airline firm in the industry becomes deeply connected to the action and reactions of every single airline firm. If one company